The MPAA wrote me back in response to my post here thanking our local paper for actually considering (for the first time I have ever seen locally) that subsidizing movie production locally might not be a good idea. The MPAA sent me a response, which in full is online here.

I will state in general that the whole academic sub-field of making net economic contribution calculations (always full of fact juicy multipliers) is a total write-off in my mind. You can pretty much throw out everything you read as crap. Because most are funded by the folks (e.g. sports team owners) who want the subsidy, so the analyses almost always miss the unseen: Here are all the job gains and benefits in our industry! But these studies almost always miss the opportunity cost effect of taking tax money and revenues from other industries. Besides, I truly believe the economy is far too complicated to pull out one single variable out of billions and forecast changes to overall economic numbers from changes in that single variable.

Here is the email I wrote back:

Sorry, but all industry-specific government subsidies are a total useless gravy train for the politically-connected industries that are able to obtain them.

These state subsidies are only shifting jobs from state to state. Why should Americans be paying taxes just to move companies to different places around the country?

The implication is that somehow your jobs you provide are better than the jobs my company provides, since you get taxpayer money handed to you and I don't. Why? Can you really make an academic argument that your multiplier of your jobs is somehow higher than my employees' multiplier? Your jobs last 3 months or so in my state, and the highest skilled and highest paid jobs go to people who travel only temporarily in from out of state. My jobs in my company have lasted for over 25 years. Remember -- you are essentially demanding that I be forced to pay money from my business to yours.

Markets do a really good job of allocating capital. No industry, I suppose, feels like investors give them all they deserve. But what you are doing in effect is demanding that the market's allocation of capital be interrupted, and capital that would have been used for other purposes should be forced to be used for your purposed instead. What basis do you have for claiming this? And do your analyses ever consider the opportunity cost of what that tax money you are using would have been used for if it were not grabbed away for you?

Your problem is basically that your movies don't make enough money on their own to cover costs and you need taxpayers to make up the difference. After all, you are arguing that less activity would occur without these subsidies so these subsidies must be the difference between losing and making money (and thus between greenlighting and turning down certain projects). To which I would provide a suggestion -- you need to do what all the rest of us business owners who don't have access to Uncle Sugar's money spigots must do when revenues don't cover costs: Fix your costs or increase your revenues. Make better movies or get your costs under control. Don't demand that I, as a taxpayer, have to make up the difference because you are too lazy or greedy to fix your own financial problems.

I can't prove it, but I am not at all convinced subsidies make more movies. I think that subsidies tend to just increase the income of those in the movie production chain with the most bargaining power, such as actors and producers. This certainly is what has happened with sports subsidies. We insanely subsidize every pro sports team in America. Do you really think we would have fewer pro sports teams without the subsidies? No -- the subsidies have simply flowed to increasing the income of the top athletes and team owners.

At the end of the day, your industry is particularly good at getting this money forced out of taxpayer hands for two reasons. The first is that politicians hope for financial support from you in the next election. Hell, you might even convince me that local small-time politicians do it entirely just for a photo op with some actor or celebrity. And the second is that you make for a sexier press release. Politicians like saying they funded Apple or Tesla or highbrow art like "Sausage Party" -- it makes for a better soundbite in their campaigns than saying they funded a call center or a machine shop.

3 Comments

Bloke In North Dorset:

I recently finished a Govt project where I was a technical expert for a project to provide 2G coverage in areas without any mobile. One of the more incompetent civil servants, a low bar to fail, was moved off the project.

When I asked where he had gone, civil servants are never sacked, I was told that it with the Britsh Film Industry Policy Unit. Expressing my surprise that we even have one I was told we wouldn't have a British film industry without one. My only comment was "so if we don't want to watch their films we're going to pay for them anyway". To which the response was along the lines of, of course.

davesmith001:

I agree completely with all your points except one.

Why would you think that the subsidies don't make more movies? I'd be almost sure they, indeed, do.
This is what makes them inefficient. (Of course, the changes in location created by the subsidies also is inefficient.)

mlhouse:

As my home town team gets set to play for the first time (regular season) in their new billion dollar stadium, it is difficult to imagine that anyone can be convinced that such an investment is worth it when you consider that the primary purpose of the "investment" is something that is used, at most, 40 hours per year. 10 football games times 4 hours/game.

Sure, there are other attractions, like concerts, that use the stadium. But, then, those events were used to sell the other stadiums and convention centers in Minneapolis so there really is limited incremental income from these events. There has been a "Home and Garden" show in Minneapolis for the past 30 years one place or the other.

The other claim is that these sporting events bring in fans from outside the taxing area. Well, that is true. But, then the opposite happens. Your home fans travel to another area to follow the team. On average, this probably sums to zero.

And when you realistically break down the "employment" numbers it is virtually impossible to justify any of this infrastrucure build on the public dollar. Outside of the team itself, each job created is only a 10/260 FTE and most of those jobs are minumum wage jobs that produce little tax revenues.

THe only economic argument that exists is with the jobs and income directly related to the team and to the stadium. So, the state usually charges a ticket tax and they get the income tax generated on high income athletes, coaches, and executives.

I believe that the public can justify a partial investment based on these tax revenues although it is far less than what is being spent on these stadiums.